INDONESIA WILL NOT FEEL MAJOR IMPACTS OF GREEK ECONOMIC CRISIS

By Andi Abdussalam

Jakarta, July 4 (Antara) -- The economic crisis in Greece, which is now in a state of default after failing to pay debts worth 1.6 billion Euros to the International Monetary Fund, will not have major impacts on Indonesia.         Observers believe that Indonesia will not feel significant impacts, but the country's exports to Greece will be affected.     According to Bank Indonesia (BI), the impacts of the Greek economic crisis on Indonesia's economy will be relatively low because the country has implemented precautionary measures and its domestic economic fundamentals have been improving.         "We can see that the effects of the Greek crisis on Indonesia are not significant, even with Greece's risk-on risk-off approach. European countries also believe that the Greek crisis can be fought," Governor of BI Agus Martowardojo said at the House of Representatives building on Wednesday, July 1.           He added that he was staying abreast of the latest developments in Greece.     The governor of Indonesia's central bank also stressed the importance of monitoring global economic developments, such as the normalization of the Federal policy, the weakening of the Chinese economy, and European economic conditions and their impacts on Indonesia's economy.         "We have to acknowledge that Indonesia's current economic fundamentals are relatively better than their state two years ago. The inflation rate is also under control," Martowardojo remarked.         However, Indonesia's exports to Greece will be affected, Spokesman for the Foreign Affairs Ministry Arrmanatha Nasir pointed out.         "The value of trade between Indonesia and Greece is not too large, amounting to only US$200 million, but it is still relatively significant. Indonesia's exports to Greece will be affected, more or less," Nasir stated.         He added that Indonesia has good relations with Greece, particularly with regard to cooperation in the trade field. "Indonesia has good relations in the trade sector with Greece. It exports numerous goods such as crude palm oil and other commodities," he noted.         As a result, Nasir observed, the Greek economic crisis will influence Indonesia's exports to the country. But its effect will not be too severe, let alone comparable to the economic crisis it faced in 1998.         "Indonesia will not go bankrupt like Greece," Special Staff of the Finance Minister Arif Budimanta affirmed during a discussion organized by the Public Relations Division of the People's Consultative Assembly here on Saturday.         He added that the Greek fiscal deficit was 60 percent, while Indonesia's was less than 1.9 percent. "In terms of economic growth, we are witnessing a positive trend, whereas the economic growth of Greece is in the negatives."    Therefore, Budimanta has urged all sides to be optimistic regarding the country's financial conditions. They should not fear unfavorable conditions as the government has adopted pro-people policies so far.         The government's pro-people policies are reflected in the budget policy, which focuses on the development of villages. The budget allocated for this purpose was raised from Rp9.7 trillion in 2014 to Rp21 trillion this year.         Furthermore, an economist of Standard Chartered Bank, Eric Sugandi, believes that the Greek crisis will only have indirect impacts on Indonesia's economic growth.         "Although not direct, its effects can still be significant," Sugandi remarked on Monday, June 29.         He pointed out that Greece's problems will not directly influence the Indonesian economy because it is not a primary investor in the country. Indonesia's economy will be affected indirectly as other countries that are business partners with Greece will feel the impacts.         Moreover, the economic growth of Indonesia will also be influenced by other external factors such as the appreciating value of the dollar against those of other currencies.         According to Sugandi, the "super dollar" phenomenon will affect financial channels, as well, while the rupiah continues to weaken with the strengthening of the dollar.         "The dollar will remain strong against the Euro and currencies of other emerging markets, including against Indonesia's rupiah. Financial channels and psychological factors will feel the impacts," he noted.         Unless Greece pays off debts worth 1.6 billion Euros to the International Monetary Fund, it will be declared bankrupt.         In addition, several other European countries are willing to bailout Athens, stipulating requirements for a number of changes in its budget, he said.     Earlier, Head of Public Policy and the Economic Study Center of Gadjah Mada University Tony Prasetiantono had pointed out that Indonesia was still far from facing an economic crisis at par with the one in 1998, which was triggered by the weakening of the rupiah.         "The weakening of the rupiah in 1998 had caused its value to drop to Rp15,000 against the U. S. dollar. It is now Rp13,500 per U. S. dollar. Although the figure is nearly the same, the conditions in 1998 and those now are significantly different," Prasetiantono explained on Thursday, July 2.         In 1998, he stated, the inflation rate was 78 percent. The weakening of the rupiah had caused customers to withdraw their money from banks in cash and the central bank, Bank Indonesia, to print money in large amounts.         "At present, the inflation rate is 7.15 percent year-on-year, which is far better than that in 1998," he remarked.         He further noted that the deposit interest rate in 1998 was 60 to 70 percent, much higher than the credit interest rate of only 24 percent.         "As a result, there was a negative spread that caused banks to collapse, including major government banks. However, there are no cases of banks collapsing now. So the conditions in 1998 were far more severe as compared to present conditions," he emphasized.         Therefore, Indonesia's present economic state is much better and the Greek crisis is not expected to cause major impacts on its economy.     ***3*** (T.A014/INE) EDITED BY INE (T.SYS/A/BESSR/Suharto) 04-07-2015 21:43: